E&O Loss Control Articles

What to Know When Placing Coverage with FAIR Plans

Utica National Insurance Group E&O Risk Management

What is a FAIR (Fair Access to Insurance Requirements) plan?

It is a state-mandated property insurance plan that provides coverage for risks unable to obtain insurance in the regular market due to factors such as location, age, type of construction, condition of the property, and claims activity. FAIR plans have been established in 34 states and the District of Columbia.

FAIR plans vary significantly by state and are typically for homeowners, however, some plans are also available for commercial properties. Coverage is limited to specific named perils such as fire & lightning, and often only offered on an ACV (actual cash value) basis. Loss of use, liability, and medical payments are some of the coverages that are unlikely to be included.

Lenders will typically accept coverage under a FAIR plan, but clients should contact their lenders to ensure the coverage will meet the requirements prior to placing it. There are a few options if the FAIR plan coverage does not meet the lender’s requirements. First, find out if the lender will modify their requirements. If not, they can try to obtain a differences in conditions policy to supplement the FAIR plan coverage. Lastly, a new lender that will accept the FAIR plan coverage may need to be obtained.

When placing coverage in FAIR plans, consider the following to avoid Errors & Omissions claims related to these placements:

  • Be familiar with the specifics of coverage and eligibility for the state FAIR plans you are placing business with.
  • Review the account at each renewal to determine if coverage is available in the standard market.
  • Make clients aware of the limit and coverage limitations that apply when placing coverage in the FAIR plan.
  • Explain the difference between ACV (actual cash value) and RCV (replacement cost value) to the client when coverage is only offered on an ACV basis.
  • Offer alternative coverage options for those coverages that may not be included under the FAIR plan, such as loss of use. If an alternative is not available, advise the client that options may be available elsewhere.
  • Work with your agency’s attorney to develop a disclaimer and sign-off for clients to confirm that the clients understand the limitations of coverage under a FAIR plan.